Campaigners call for law changes allowing FCA to be sued in light of £138m Philips Trust scandal

While the majority of property titles have now been returned to owners, there are concerns that the vast majority of £44m in life savings given to the Philips Trust Corporation will not be recovered.

The FCA was warned in 2020 by a company whistleblower that Philips Trust was allegedly operating an effective ‘Ponzi scheme’ which was put life saving investments at risk but only provided ‘guidance’ to the firm rather than pursuing action against them.

Mark Bishop from the Transparency Task Force, which is a social enterprise that advocates for consumer rights in financial services, has called on MPs to back legal changes which would allow people to sue the FCA and changing its “Potemkin” complaints scheme requiring it to pay compensation in cases of regulatory failure such as this one.

He said in the Horizon scandal, the ability for subpostmasters to sue the Post Office had been key to bringing the truth to light but that option is not available to those who feel they have suffered losses as a result of FCA failings.

Mr Bishop said: “Consumers and whistleblowers who suffer life-changing financial losses through regulatory failure by the FCA would be unable to even begin that process, because it has statutory exemption from civil liability, so can’t be sued. Had the Post Office been given the same privilege, subpostmasters would still be howling in the wind.”

Under current rules, individuals and organisations can pursue judicial reviews of FCA decisions. In an recent example, environmental law charity ClientEarth unsuccessfully sought a review over its approval of a prospectus for a North Sea oil and gas operator.

The Financial Regulators Complaints Commissioner also assesses complaints about the FCA but its recommendations on issues like potential compensation are non-binding.

The Government has previously said the statutory immunity of the FCA is important as it enables it “to take a robust approach to regulation”. It said the legal protection prevents “the risk that firms can delay supervisory interventions through vexatious litigation”.

York Central MP Rachael Maskell has today backed calls to reform rules governing the FCA.

The Labour MP said: “The horror stories of people losing their life savings because of Philips Trust bombing into administration are difficult to read. People and their hard-earned savings should be protected.

“I support reform of the financial sector and the FCA, it cannot be right that they are beyond reproach or not given the right to act in shocking instances such as the Philips Trust administration. When there are millions lost, it shouldn’t be left to victims and campaigners to try to clawback the significant losses alone.

"My colleagues in Westminster have undertaken detailed investigation alongside the Transparency Task Force and it is only right that their findings and recommendations are seriously considered for urgent review of the law governing finance; to stop more people tragically losing everything because of mis-selling and poor advice.”

An FCA spokesperson said: “Our complaints scheme is there so where issues have arisen, we can learn lessons from them. It also provides a route for payments in recognition of financial loss if we have made a clear and significant error, and we are the sole or primary cause of that loss.

“Our statutory immunity helps us take a robust approach to regulation – so for example we don’t risk firms delaying regulatory action by making claims for damages. But that doesn’t mean our decisions aren’t open to challenge, for example through Judicial Review or the Independent Complaints Commissioner.”